Digital Nomad
Preparing for Making Tax Digital for Income Tax: What Sole Traders & Landlords Need to Know
From 6 April 2026, sole traders and landlords in the UK with qualifying income over £50,000 must use Making Tax Digital for Income Tax—here’s how to prepare and what to expect.
By NomadicTax Research Team • 5-8 min read • April 18, 2026
## What is Making Tax Digital (MTD) for Income Tax?
Making Tax Digital for Income Tax is a landmark reform requiring eligible sole traders and landlords to keep digital records and submit quarterly updates to HM Revenue & Customs (HMRC), rather than just an annual self-assessment. It’s designed to spread the workload more evenly, reduce errors, and make tax administration smoother for everyone. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital?utm_source=openai))
## Who has to comply from April 2026?
If all of the following apply, you’ll need to use MTD from **6 April 2026**:
• You’re an individual registered for Self Assessment;
• You receive income from self-employment or property (or both);
• Your **qualifying income** (gross income, before expenses or allowances) from those sources is over **£50,000**. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital?utm_source=openai))
## How to comply: what you’ll need to do
| Step | Action | Details |
|---|---|---|
| Digital records | Keep detailed digital records of **income and expenses** for your self-employment and property businesses. Includes dates, amounts, categories. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records?utm_source=openai)) |
| Update frequency | Submit **quarterly updates** every three months covering income and expense totals. No need for full accounting adjustments in each update. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates?utm_source=openai)) |
| Software | Use HMRC-recognised compatible software. If just using spreadsheets, you’ll need bridging or compatible tools to send updates and final returns. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital?utm_source=openai)) |
| Annual return | At the end of each tax year, submit a final declaration (similar to current SA return), including all other income sources & claim relevant reliefs or allowances. Pay by **31 January** following the end of the tax year. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital?utm_source=openai)) |
## Penalties & transitional relief
- There’s a **points-based penalty system** for late submissions under MTD: miss a quarterly update or annual declaration, you get a “penalty point”; reaching a threshold leads to financial penalties. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/6807527fe16c376084e7c751/making-tax-digital-for-income-tax-agent-toolkit.pdf?utm_source=openai))
- For the first 12 months from implementation (6 April 2026), HMRC will **not enforce penalty points** for late quarterly updates. However, late tax returns still carry penalties. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates?utm_source=openai))
## Why this matters now—actionable steps
1. **Check whether you’ll be in scope**: assess your gross income from self-employment + property. If over £50,000, start preparing now.
2. **Select compatible software**: compare options, ensure they support quarterly updates and final declaration.
3. **Organize digital records**: set up categories, entries by date, make your accounting period clear.
4. **Understand deadlines**: e.g. first quarterly update due by 7 August 2026 for period 6 April–5 July. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates?utm_source=openai))
5. **Budget time and resources**: training, accounting support, potential costs of transitioning should be factored in.
## Example scenario
Sarah is a landlord and sole trader whose gross income from property and self-employment in tax year 2024-25 is £55,000. She doesn’t currently use digital software. From 6 April 2026 she will need to: keep digital records, send quarterly updates through compatible software, and file her annual declaration by 31 January 2027. If she misses the first quarterly update deadline (7 August 2026), under new rules she won’t get a penalty point for this first year—but from year 2, late updates may incur points and late penalties.
## Common questions and pitfalls
- **What counts as qualifying income?** It’s the gross figure before expenses, allowances. Partnership profits for a partner count towards qualifying income. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital?utm_source=openai))
- **Am I exempt?** Certain groups are deferred or exempt (ministers of religion, those without property or self-employment income, etc.)—check official HMRC exemption lists. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))
- **Choosing update period style:** Standard periods align with the tax year; calendar periods align with calendar months. Choose depending on accounting period. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates?utm_source=openai))
## Summary
If you’re a sole trader or landlord with gross property/self-employment income over £50,000, MTD for Income Tax is coming in **April 2026**. Start your transformation now—select compatible software, organize your records, and plan your calendar of updates. This modernized regime offers efficiency—and although there’s a learning curve, the early rewards include better visibility, fewer surprises, and smoother compliance.